Transaction Expands Cigna's Health Care Membership and Product Offerings in Key Regions and Employer Segments, including Small Businesses
PHILADELPHIA, April 01, 2008 - Cigna (NYSE: CI) announced today that it has completed the acquisition of Great-West Healthcare, the Healthcare Division of Great-West Life & Annuity Insurance Company. The cost of the acquisition includes $1.5 billion in cash to Great-West Life & Annuity Insurance Company and additional capital of $400 million to be retained by Cigna subsidiaries to support the acquired business.
Headquartered in metro Denver, Colorado, Great-West Healthcare is now part of Cigna, one of the nation’s leading health service businesses. The transaction includes 1.9 million covered lives, including approximately 1.4 million medical members in its employer segment, which is consistent with Cigna's expectations.
“The addition of this organization and its talented team will broaden our distribution and provider network in key geographic areas and expand the range of health benefits and products we offer,” said Cigna HealthCare President David Cordani. “This transaction increases the opportunities for national and mid-size employers to improve the health, well-being and security of their employees, and adds service and distribution capabilities specifically designed to meet the needs of smaller businesses.”
The acquisition is inclusive of Great-West Healthcare’s people and full portfolio of health and group insurance offerings and the supporting information technology infrastructure. Great-West Healthcare offers a broad range of products and services, including consumer-driven health care plans, which are offered with a range of funding options.
Cigna continues to expect that the acquisition will be accretive to earnings beginning in 2008. Synergies are anticipated to be achieved related to managing medical costs, capturing operating expense synergies and growing membership over time.
Cigna Corporation and its subsidiaries constitute one of the largest investor owned health and related benefits organizations in the United States. Cigna (NYSE: CI) provides employers with benefits, expertise and services that improve the health, well-being and security of their employees. Serving approximately 47 million people in the United States and around the world, Cigna's operating subsidiaries offer a full portfolio of medical, dental, behavioral health, pharmacy and vision care benefits and group life, accident and disability insurance. Web site: http://www.cigna.com/.
CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Cigna and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in Cigna’s filings with the Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial prospects, economic conditions, trends and other uncertainties. These forward-looking statements are based on management’s beliefs and assumptions and on information available to management at the time the statements are or were made. Forward-looking statements include but are not limited to the information concerning possible or assumed future business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, trends, and, in particular, Cigna’s productivity initiatives, litigation and other legal matters, operational improvement in the health care operations, and the outlook for Cigna’s full year 2008 results. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should” or similar expressions.
You should not place undue reliance on these forward-looking statements. Cigna cautions that actual results could differ materially from those that management expects, depending on the outcome of certain factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:
|1.||increased medical costs that are higher than anticipated in establishing premium rates in Cigna's health care operations, including increased use and costs of medical services;|
|2.||increased medical, administrative, technology or other costs resulting from new legislative and regulatory requirements imposed on Cigna's employee benefits businesses;|
|3.||challenges and risks associated with implementing operational improvement initiatives and strategic actions in the health care operations, including those related to: (i) offering products that meet emerging market needs, (ii) strengthening underwriting and pricing effectiveness, (iii) strengthening medical cost and medical membership results, (iv) delivering quality member and provider service using effective technology solutions, and (v) lowering administrative costs;|
|4.||risks associated with pending and potential state and federal class action lawsuits, purported securities class action lawsuits, disputes regarding reinsurance arrangements, other litigation and regulatory actions challenging Cigna's businesses and the outcome of pending government proceedings and federal tax audits;|
|5.||heightened competition, particularly price competition, which could reduce product margins and constrain growth in Cigna's businesses, primarily the health care business;|
|6.||risks associated with the Company's mail order pharmacy business, which, among other things, includes any potential operational deficiencies or service issues as well as loss or suspension of state pharmacy licenses;|
|7.||significant changes in interest rates for a sustained period of time;|
|8.||downgrades in the financial strength ratings of Cigna's insurance subsidiaries, which could, among other things, adversely affect new sales and retention of current business;|
|9.||limitations on the ability of Cigna's insurance subsidiaries to dividend capital to the parent company as a result of downgrades in the subsidiaries' financial strength ratings, changes in statutory reserve or capital requirements or other financial constraints;|
|10.||inability of the program adopted by Cigna to substantially reduce equity market risks for reinsurance contracts that guarantee minimum death benefits under certain variable annuities (including possible market difficulties in entering into appropriate futures contracts and in matching such contracts to the underlying equity risk);|
|11.||adjustments to the reserve assumptions (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating Cigna's liabilities for reinsurance contracts covering guaranteed minimum death benefits under certain variable annuities;|
|12.||adjustments to the assumptions (including annuity election rates and reinsurance recoverables) used in estimating Cigna's assets and liabilities for reinsurance contracts that guarantee minimum income benefits under certain variable annuities;|
|13.||significant stock market declines, which could, among other things, result in increased pension expenses of Cigna's pension plan in future periods and the recognition of additional pension obligations;|
|14.||unfavorable claims experience related to workers' compensation and personal accident exposures of the run-off reinsurance business, including losses attributable to the inability to recover claims from retrocessionaires;|
|15.||significant deterioration in economic conditions, which could have an adverse effect on Cigna's operations and investments;|
|16.||changes in public policy and in the political environment, which could affect state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market for Cigna's health care products and services; and amendments to income tax laws, which could affect the taxation of employer provided benefits, and pension legislation, which could increase pension cost;|
|17.||potential public health epidemics and bio-terrorist activity, which could, among other things, cause Cigna's covered medical and disability expenses, pharmacy costs and mortality experience to rise significantly, and cause operational disruption, depending on the severity of the event and number of individuals affected;|
|18.||risks associated with security or interruption of information systems, which could, among other things, cause operational disruption;|
|19.||challenges and risks associated with the successful management of Cigna's outsourcing projects or key vendors, including the agreement with IBM for provision of technology infrastructure and related services;|
|20.||the ability to successfully integrate and operate the businesses being acquired from Great-West by, among other things, renewing insurance and administrative services contracts on competitive terms, retaining and growing membership, realizing revenue, expense and other synergies, successfully leveraging the information technology platform of the acquired businesses, and retaining key personnel; and|
|21.||the ability of Cigna to execute its growth plans by successfully leveraging its capabilities and those of the business being acquired from Great-West to further enhance the combined organization's network access position, underwriting effectiveness, delivery of quality member and provider service, and increased penetration of its membership base with differentiated product offerings.|
This list of important factors is not intended to be exhaustive. Other sections of Cigna’s most recent Annual Report on Form 10-K, including the “Risk Factors” section, the Cautionary Statement in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other documents filed with the Securities and Exchange Commission include both expanded discussion of these factors and additional risk factors and uncertainties that could preclude Cigna from realizing the forward-looking statements. Cigna does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.